Small business confidence improving, but pessimism remains
Scottish small business confidence has risen for the second consecutive quarter but a majority of these firms remain pessimistic about future conditions, a new survey has found.
Scottish small business confidence has risen for the second consecutive quarter but a majority of these firms remain pessimistic about future conditions, a new survey has found.
The latest index from the Federation of Small Businesses found business optimism in Scotland rose to -3.8 points in the past three months, up from -9.6 points in the previous quarter.
Despite UK confidence falling five points in the same period it remains significantly higher than that north of the border at 15.0.
In Scotland, it has been two years since a majority of small businesses were confident business conditions would improve.
The report said the Scottish economy lagging behind the rest of the UK, partially due to low oil prices, is likely to be behind the confidence figures.
Researchers found profit margins in Scotland continue to be squeezed, with a net balance of 16% of Scottish firms reporting a drop in gross profits during the quarter.
Depreciation of sterling following the Brexit vote is said to be a continued driver behind falling profit margins due to higher prices for imported goods and services.
However, the weak currency may be boosting Scottish exports by increasing their competitiveness overseas as, despite a net balance of a 6.5% drop in export values in the past quarter, a net balance of 14.9% of small businesses expect growth in this area in the next three months.
Scottish investment intentions have weakened for the third consecutive quarter and now lag behind the UK figure by more than 12%, but small businesses continue to create jobs, with a net balance reporting increasing headcount in the same period.
FSB's Scottish policy convener Andy Willox said: “A majority of Scottish businesses have been gloomy about their prospects for two years. While over the course of 2017 a growing share of Scottish firms have shaken off the economic blues, we can't dismiss this long-term trend.
“While the health of our local economies hardly featured during the General Election campaign, it can't be forgotten about by our politicians. In the short term, the new Government needs to quash concerns over the future of EU workers and the possible reintroduction of plans to hike self-employed national insurance contributions.
“Small business owners and the self-employed risk everything to create economic activity, jobs and revenues. If we're to turn these shaky confidence figures around in the longer term, we need to create an environment where more people are ready to take that plunge.”
The Verve study surveyed 239 FSB members in Scotland between April 10 and 26